The news regarding tariffs, retaliatory tariffs and a trade war has been brutal to most companies that manufacture and sell internationally. Levi Strauss & Co. (NYSE: LEVI) is one of those companies caught in the middle. Its jeans are perhaps the most widely recognized of the “All-American brands” in the entire blue jean segment of apparel. The problem is that it manufactures those jeans internationally and sells globally into markets that have unresolved tariff issues now that President Trump has kicked off his wave of tariffs.
The good news for Levi Strauss is that the company just managed to exceed earnings expectations. The bad news is that the company is admitting it is not going to be immune from tariffs without being very specific in explanation. But in the end, Levi’s executives are calling on tariffs to have a minimal impact and that price changes would be “surgical” rather than across the board.
STOCK PRICE REACTION TOO HARSH???
Levi Strauss shares were down 5.5% at $12.75 on Tuesday’s post-earnings reaction in the middle of the trading day. This drop is also down from a $17.00 stock price the day before Trump’s tariff chart sent markets reeling. And with a 52-week range of $12.82 to $24,34, Levi Strauss was a $19 stock at the start of February.
And investors should also keep in mind that this post-tariff news drop now has shares back close to the 2020 pandemic panic selling lows when this stock was challenging $12.
AMERICAN IMAGE, BUT…
Levi Strauss annual report confirms that its products are sold in approximately 50,000 retail locations worldwide and in approximately 120 countries. And while its brands are recognized as authentically “American” over half of its 2024 net revenues came from outside the United States.
In fiscal year 2024, Levi Strauss sourced product from independent contract manufacturers located in approximately 28 countries around the world. The annual report showed that no more than 30% was sourced from any single country. Its sourcing locations are in North and South Asia, the Americas (including the United States), Europe and Africa.
WALL STREET SAYS BUY!
Multiple firms on Wall Street are telling their clients that Levi Strauss is a survivor. The price targets are being adjusted lower on some calls to reflect a deeper macro scenario for consumers and the economy, but the ratings remain quite positive in a sea of uncertainty.
Barclays maintained its Overweight rating while trimming its price target on Levi Strauss to $18 from $22. The earnings report was shown to check all the boxes after seeing continued acceleration in organic sales in both of its wholesale and direct-to-consumer segments. Barclays also pointed out that Levi Strauss saw significant gross margin expansion on full priced sales and with spending control. In the end, Levi Strauss s considered to be positioned well ahead even as news around tariffs is likely to dictate where its stock ends up in the near-term.
JPMorgan actually upgraded Levi Strauss to Overweight from Neutral, although it also trimmed its price target to $17 from the prior $19 target. This upgrade highlights that the 50% pullback in the last nine months provides an attractive entry point for investors. The analyst also shows optimism that Levi Strauss’ has an expanding total addressable market as a denim lifestyle apparel brand after proving accelerated global demand momentum in the last four consecutive quarters. Another boost is coming from a younger demographic from the 18-year-old to 30-year-old buyers.
Stifel maintained its Buy rating on Levi Strauss, even as it trimmed its target to $20 from $25. After organic revenue rose more than 8% in its last quarter, beating expectations, the overshadowing effect of tariffs and reciprocal tariffs is preventing the earnings report from shining.
The team over at Telsey Advisory Group also maintained its Outperform rating while trimming its price target to $19 from $23.
WELL, NOT ALL OF WALL STREET SAYS BUY!
There are some analyst reports that are less flattering for long-term investors. And while these are not exactly screaming “Buy” to investors even the less aggressive reports are still pointing toward upside for investors looking a year out.
BofA Securities maintained its Neutral rating and cut its price objective to $17 from $21 in the call. The firm pointed out that margin uncertainty from tariffs is clouding what was otherwise a better-than-expected earnings report. For valuations, BofA is maintaining its 2025 EPS target of $1.25 as the quarterly earnings beat is offset by the firm’s more cautious margin outlook.
Morgan Stanley maintained its Equal Weight rating and cut its target to $16 from $17. The analyst report noted that profitability expansion continued on an impressive/consistent trajectory but also said that topline growth remains the KPI/re-rating unlock. The recent volatility, a “low line of sight” and tariff news are why it is telling investors to remain on the sidelines.
Oggonomics always reminds its readers that no single analyst call should ever be the sole basis for buying or selling a stock. Analysts can be wrong, and we have all been painfully reminded from the recent market carnage that a company’s underlying fundamentals and the macro picture can change in an instant.
